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Dubai's crunch-hit gold souks left to windowshoppers

(Agencies)
Updated: 2008-12-18 23:17

DUBAI -- Gold sales in Dubai's traditional jewellery market have collapsed as much as 80 percent in the last couple of weeks as the credit crunch hits the pockets of tourists, local jewellers said this week.

Alexander Calder's "Flower Necklace" is seen during the media preview of his jewelry exhibit at the Metropolitan Museum of Art in New York December 8, 2008. Gold sales in Dubai's traditional jewellery market have collapsed as much as 80 percent in the last couple of weeks as the credit crunch hits the pockets of tourists, local jewellers said this week. [Agencies]

Gold sales in Dubai, the heart of gold trade in the Middle East, have become very much dependent on tourist interest as gold's nearly 20 percent price rise in the last three weeks has slashed domestic demand.

"Sales have fallen by 60 percent in the past two weeks and it is getting worse and worse," said Oday Alfuhaid, 23, who works at Al Bahar Jewellers in Bur Dubai, the city's old town.

"The Dubai market is 80 percent dependent on tourists, if there is no tourist, there is no business. And the tourists that do come are just window shoppers, not potential buyers," he said.

Gold's rise over the past three years has changed trends in Dubai's local market, making it more dependant on foreign sales as domestic consumers are not able to afford big chunks of jewellery any more.

Gold jewellery is a traditional gift in Arab weddings.

"Take this necklace," said Alfuhaid, holding a shiny, ornate piece of gold jewellery. "It has been hanging in the vitrine for the past three years and I can't sell it."

Even the Eid celebrations have not managed to raise sales.

"(We have seen) 80 percent collapse in gold jewellery sales during the Eid holiday," said Haji Hasam Hingora, manager of Kanz Jewels. "I haven't seen a situation like this for five years."

"The tourists are just looking, not buying. They say these prices are very high and they don't have enough money," he said.

On top of the credit crunch, jewellers also blame the gold price which has held up much firmer compared to other commodities such as oil.

"All commodities have been affected by the crisis except gold, every week it is up by one or two dollars," said Alfuhaid.

Spot gold has risen more than 18 percent since early December and currently trades at around $875 an ounce, double the price it was in 2005.

Although it has fallen around 20 percent since a record high of $1,030.80 an ounce in mid-March, it is still 5 percent higher than at the start of the year.

In contrast, oil has collapsed to around $40 a barrel from above $145 a barrel in July.

"We are...lowering our prices. We think the gold price has to maybe halve, otherwise many shops will start to close and this market will die," Hingor said.

Some jewellers also mentioned there was a lot of African buyers, particularly from Nigeria.

"The wholesalers come and buy from here, to sell it in their country," Ahmed Jamal of Mubin Dubai Jewellers. "The Arabs do not buy anymore...The only buyers are from Asia and Africa."